Janet Township decides to rent a vacant garage to provide extra parking space for police vehicles, beginning June 1, 2019. The rental is to be accounted for in the general fund. The township pays $24,000 in advance for two years rent. The city's fiscal year ends on December 31.
A. Assume that the township uses the purchases method to account for prepayments. Prepare
1. The journal entry to record the rental on June 1, 2019.
2. Any required journal entries on December 31, 2019.
3. Any required journal entries on December 31, 2020.
B. Assume that the township uses the consumption method to account for prepayments. Prepare
1. The journal entry to record the rental on June 1, 2019.
2. Any required journal entries on December 31, 2019.
3. Any required journal entries on December 31, 2020.
C. How would the unused portion of the rental payment be reported in the township's 2019 year-end governmental fund balance sheet, assuming the township
1. used the purchases method?
2. used the consumption method?
Correct Answer:
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